Friday, September 30, 2011

The Medical Cost Control Debate Lacks Value

The debate in California following the most recent rate filing by the state's Workers' Compensation Insurance Rating Bureau (WCIRB) is whether utilization review (UR) is worth the expense.

Medical costs have increased 40% since lawmakers made utilization review (UR) mandatory in 2003, the WCIRB said in its 2012 pure premium rate filing.

Insurance Commissioner David Jones and his chief actuary, Ronald Dahlquist, both asked at a rate hearing held in San Francisco on Tuesday whether this means utilization review isn't working, and that is a valid question especially in light of the fact that UR costs have increased dramatically.

Dave Bellusci, chief actuary for the Rating Bureau, responded that while UR is a significant cost driver and one of the most rapidly growing components of medical costs since 2005, that doesn't mean it isn't working.

Bellusci's statement brings out one of the faults of the current structure of defining medical costs by the WCIRB - that UR is a medical cost. I disagree.

UR is an employer/carrier administrative cost. While it is a component of medical cost control, it is a voluntary cost control measure that is instituted at the employer/carrier level, not at the physician/medical delivery level.

A component that was not discussed relative to whether UR works is the impact UR might have on other claim costs - whether delays in claims management caused by UR denials and then subsequent appeals adds to the costs of indemnity, both temporary and permanent, and to later medical costs.

Bellusci said he expects UR costs to level off, even though that trend hasn't appeared yet in data collected by the WCIRB. He also said he agrees with the recommendation in a Rand Corp. study published by the Commission on Health and Safety and Workers' Compensation (CHSWC ) in October that suggests studying whether employers are getting the maximum benefits from UR and how frequently treatment decisions should be reviewed.

Another cost driver that is part of the WCIRB equation on medical costs, and which should be attributed to administrative costs, is medical bill review. 

Both UR and bill review are big businesses and generate giant revenues for these service provider owners. I think that both cost components need to be analyzed for their relative benefit to the work comp community, and whether there are better methods for maximizing the dollar value of medical services.

Note that I said "dollar value" of services. I am not convinced that controlling costs on an itemized basis is the best way to determine whether any particular medical constituent is being fairly reimbursed for services or goods provided.

The state should follow the recommendations of CHSWC and contract with Rand Corp. to study UR, and bill review, on a global claims cost basis, to determine if in fact these services are returning value to the community, if so how much and what that value is, and whether there may be other more efficacious methods of looking at the relationship of medical care delivery in the total claim cost equation.

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